As a general rule, the most successful man in life is the man who has the best information
by Richard (Rick) Mills
Ahead of the Herd
A number of factors influence gold prices (mainly the US dollar, gold ETF inflows/ outflows, inflation rate, bond yields, safe haven demand, physical gold demand, gold supply) but none is more reliable than real interest rates.
The demand for gold moves inversely to interest rates – the higher the rate of interest, the lower the demand for gold, the lower the rate of interest the higher the demand for gold.
The reason for this is simple, when real interest rates (interest rate minus inflation) are low, at, or below zero, cash and bonds fall out of favor because the real return is lower than inflation – if you’re earning 1.6% on your money from a government bond, but inflation is running 2.7%, the real rate you are earning is negative 1.1% – an investor is actually losing purchasing power. Gold is the most proven investment to offer a return greater than inflation, by its rising price, or at least not a loss of purchasing power.